Moody's downgrades New Jersey credit rating

For the third time this year a major Wall Street ratings agency has lowered New Jersey's credit rating, citing revenue shortfalls and other budget problems.

Moody's Investors Service announced Tuesday that it was downgrading the state's credit rating by one step because of New Jersey's "weakened financial position resulting from recurring revenue shortfalls and ongoing reliance on non-recurring resources."

Last month, the state Department of Treasury made public an $807 million budget shortfall and said it was largely due to income tax collections falling short of the estimates used to support state spending. The gap between what officials expected to collect in taxes and what people actually paid is the latest in a series that Governor Christie has had to deal with since taking office in early 2010.

And like the others must be closed before the fiscal year ends June 30. Closing it likely means cuts in state services or in programs like aid to public schools.

The state's credit rating is an important factor in determining how cheap and easy it is to borrow money for capital projects such as schools and bridges that cannot be funded in one budget year.

Tuesday's announcement from Moody's follows earlier downgrades by Standard & Poor's and Fitch Ratings, the other two major Wall Street ratings agencies.

It also marks the sixth downgrade since Governor Christie -- a Republican who has tried to make the case that his fiscal policies have rescued the state after years of mismanagement by Democratic predecessors -- took office. That ties the record for a New Jersey governor set by former Democratic Gov. Jim McGreevey, though McGreevey reached six downgrades in less than three years.

Joseph Perone, a spokesman for the state Department of Treasury, said the Moody's downgrade "affirms the urgent need to address New Jersey’s long-term fiscal health."

Christie has talked for much of the year about the need to make further changes to the public employee pension system as higher state payments required by a state law he enacted earlier in his tenure have now come due. The current, $33 billion budget calls for a $1.6 billion pension contribution, and the payment would go up to $2.25 billion in the $34.4 billion spending plan Christie has proposed for the fiscal year that begins on July 1.

But so far, the governor has yet to identify exactly what should be done to further reduce pension costs after a bill he signed into law in 2011 increased the retirement age, ended cost of living adjustments and required employees to contribute more toward their retirements. Democrats who control the state Legislature have also been reluctant to embrace Christie's call for further changes.

Perone said the Moody's downgrade should "serve as a clear warning and call for the Legislature to join the Governor in taking on the cost of these entitlements in a real way to secure our long-term fiscal health and protect our ability to make investments that matter most."